Outlook 2016: Predictions on the economy, oil, the markets and Donald Trump

It was an unpredictable year, 2015. The Liberals defied polls to win a sweeping majority government, while the Canadian stock market was one of the biggest losers in the developed world. Oil prices crashed lower than most expected, and the country’s once-hottest economy — Alberta — became a have-not province. As the new year begins, the National Post and Canadian Club of Toronto hosted its 39th Annual Outlook luncheon Wednesday to debate what 2016 has in store.

Peter J. Thompson/National Post

Andrew CoynePostmedia columnistDeteriorating fiscal situation

Coyne cast doubt on the effectiveness of the federal government’s stimulus package, worrying that the Liberals would back themselves into years of deficit spending with little attention paid to how to dig themselves out.

“You can always come up with reasons why you can run deficits short term,” he said. “It’s long term that’s the real problem.”

Coyne predicted that it a provincial bankruptcy will occur in the next two decades, and warned that the country was not adequately prepared to deal with an aging population, declining work force growth and a reality where provinces are drawing closer to spending 50 cents out of every dollar on health care.

“Old people are expensive to take care of,” he said.

But he did have some optimism to offer. Coyne dismissed the idea that Canada is in a housing bubble, and that an imminent spike in interest rates would pop it. ‘The kind of disaster that some people conjure up in their minds is just not there,” he said.

For Jestin, the biggest story now is about the changing economic landscape that is shifting economic power from the oil-rich provinces, such as Alberta, back to the more diversified economies, such as Ontario.

“Oil was the most important story for Canada over the past 15 years,” he said. “The change is going to continue.”

But while economic power will shift, a return to the glory days where Ontario’s manufacturing sector drove growth are likely over, he said. “The issue with manufacturing is there was a hollowing out, we lost a lot of jobs that aren’t coming back.”

The new environment, however, has also created opportunity for manufacturing companies to morph into something more efficient, he says. Jestin predicts that a new wave of manufacturing companies that focus on global, niche markets (away from the traditional focus on the U.S.) will emerge in the coming years.

“By and large we should celebrate the new types of manufacturing businesses that are growing,” he said.

Peter J. Thompson/National Post

Amanda LangBloomberg TV Canada anchorThis is the year oil rebounds

Lang made one of the bolder calls on the panel by declaring that oil will be above US$70 a barrel by the end of the year.

“Geopolitics will play a role,” Lang told the audience.

Lang notes that one of the theories about why the U.S. has allowed OPEC to drive down oil prices is because it harms Russia. But she predicts Russia will be less ostracized in 2016, as the country continues to be a partner in the fight against terrorism.

With the U.S. in an election year, American politics received a lot of attention from the panelists and Corcoran made the boldest call of all: Republicans will win the 2016 election.

“They will win the presidency either with Marco Rubio or Donald Trump,” he said, noting that he doesn’t endorse either candidate.

Corcoran also saw little catalyst for oil prices this year, and noted that while there is a lot of worry about $35 a barrel crude, that price is essentially the long-term mark for oil when adjusting for inflation.

“The world of oil is back down where it should be,” he said, adding prices will be kept down as “there will always be new technologies to find oil and new ways to get it.”

He did voice concerns about the health of the Canadian economy and the government’s plan for deficit spending.

“Every province now is a have-not province, where’s the money going to come from?”

Peter J. Thompson

Diane FrancisFinancial Post editor-at-largeAnother rough year for Canadian stocks

Francis said she sees Canada’s stock market, which was beat up in 2015, as once again being mediocre this year, finishing “where it is now or lower.”

She also noted that while the Canadian dollar has been a challenge for some companies, others have been thriving, particularly those that have their profits in U.S. dollars and their costs in Canadian dollars.

Chiming in on the American elections, Francis said that while the media is enamoured with Donald Trump at the moment, she sees a potential pairing of Hillary Clinton and Bernie Saunders on the Democratic ticket as the one unbeatable team in 2016.